June 2015
Issue #41



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Hello,

Many leases are silent about issues which experienced tenants know must be raised in order to protect their tenancy.

In today's issue we look at one of these issues; how your lease addresses the presence of hazardous materials.

Sincerely,

Alan Katz
Mintz & Gold LLP 

 

Ya Gotta Prepare! Mets Hats and Other Hazardous Substances

 

For those of us who are "folliclely challenged", wearing a hat is essential. It keeps you warm in the winter and shaded in the summer.

My hat of choice is a black New York Mets cap with blue lettering.

I have been a Mets fan since Wes Westrum was manager (look him up, youngins') and it is nothing if not character building.

The Mets hat is also a magnet for comments walking around NYC; from snickering, to pity, to Yankee fan trash talking, even to creative requests from people asking for money ("hey, you're a Mets fan, you must root for the underdog, can you spare a dollar?").

In a bizarre twist this April, the Mets had the best record in baseball behind a group of exciting young players.

Out on the asphalt, I suddenly had new street cred. People gave me congratulatory nods and compliments and I was no longer alone in my Mets attire.

It shows that you should always expect the unexpected.

Of course it was only April, and as I write now the Amazins have lost a bunch in a row and may soon plummet back to normal so, just as I was polishing a practiced nonchalance at our spot atop the standings, the unexpected has, unexpectedly, gone back to the expected.

In commercial leasing, you must also expect the unexpected, for leases are filled with traps for the unwary.

A good example is the protection tenants need regarding hazardous materials.

Hazardous materials include petroleum products, asbestos or asbestos containing materials (or "ACM"), or any other material recognized as being hazardous by environmental laws.

Most leases prohibit tenants from bringing hazardous materials into their premises and make them responsible for any resulting damage.

Okay so far, but many leases are written broadly enough to make tenants responsible whether or not they had anything to do with the contamination.

As a tenant leasing an unfamiliar space, even on an "as is" basis, you need protection from latent hazardous materials.

Hazardous materials in your space can result in costly remediation or removal, can endanger the health of your employees (and expose you to liability to those employees) and can delay tight timeframes and increase strict budgets for tenant improvements.

Avoid getting called out on strikes when negotiating your hazardous materials provision by addressing the following seven concerns:
  • Limit your obligations. You should only be responsible for hazardous materials that you or your agents introduce into the premises (but allow the use of hazardous materials customarily utilized by office or retail tenants in connection with typical equipment or cleaning).
  • Seek landlord representations. Ideally, your landlord should represent that your premises is free of ACM, mold and other hazardous materials. It is your landlord's building and any risk should lie with your landlord.
  • Require independent evidence of non-contamination. This evidence can take the form of prior environmental studies. In New York City, tenants require a form "ACP-5" issued by the NYC Department of Environmental Protection, which is needed to obtain a building permit but also provides comfort with respect to ACMs.
    • You need to be aware that an ACP-5 is not a panacea, even with respect to asbestos. For one thing, ACP-5s only indicate that a particular construction project (e.g., your landlord's demolition work) is a non-asbestos project. This does not mean asbestos or other hazardous materials will not subsequently be discovered.
    • ACP-5s only indicate the status of the project. It is not enough just to have an ACP-5; it must specifically indicate that the project is free of ACMs (as opposed to containing limited ACMs).
  • Obligate your landlord to address contamination. Many sophisticated landlords will resist making representations, but will covenant not to release hazardous materials and to remove or remediate actual hazardous materials discovered within your premises (or outside your premises if access to such areas is required in connection with an alteration, e.g. shafts for conduit).
    • To the extent such contamination prevents you from obtaining a building permit and commencing your initial alterations, or otherwise makes any part of your space unusable, endeavor to obtain a rent abatement during the remediation period.
    • Protect yourself from the presence of vermiculite, a naturally occurring substance often used in fire proofing, insulation and tiles, but some of which contain asbestos.
    • Some landlords will limit their obligation to removal or remediation "as required by law". This is generally a reasonable compromise, but be aware that the presence of some ACMs can meet legal requirements but still cause a concern for you or your tenants, such as vermiculite or encapsulated ACMs.
    • Some landlords in urban buildings will try to limit their obligations to ACMs, but you should insist on covering all hazardous materials.
  • Require indemnification. Just as your landlord will require indemnification from you to the extent that you or your agents release hazardous materials into the premises, you should be indemnified by your landlord to the extent pre-existing hazardous materials are discovered or landlord or its agents release hazardous materials into your premises or common areas utilized by you.
  • Allow for self-help. Although this will only be available for large leases, request the right to remove or remediate the hazardous materials yourself if your landlord does not do so on a timely basis, along with the right to offset the associated costs against rent.
  • Keep an eye on operating expenses. You need to be careful that these same environmental clean-up costs are not passed back to you as operating expenses. You should exclude from operating expenses costs of testing for, removing and remediating hazardous materials (particularly if pre-existing), retrofitting to address future environmental requirements or concerns, the cost of environmental insurance and costs to obtain LEED status.
I grew up to Tug McGraw's exhortation "Ya gotta believe!" in the Mets miracle years (yes, I know, Richard Nixon was President and a touch tone telephone was considered high tech, so it has been a while). Ya also gotta believe that you would be wise to follow these suggestions to avoid expensive and time consuming environmental costs under your lease.


"I had (while managing the New York Mets) one foot in the grave and the other on a banana peel."
- Wes Westrum (1967)


"Can't anybody here play this game?"
- Casey Stengel (1962)


About Us

 

Mintz & Gold prides itself on providing the highest quality legal representation often associated with large law firms with the attention and reasonable costs of a smaller law firm.  Mintz & Gold's Real Estate Department has a national practice specializing in a broad range of commercial real estate law, with a particular focus on commercial leasing. We have extensive experience with respect to office, retail and shopping center leasing, and have represented major Manhattan landlords, national and multinational institutional tenants and national retail chains. Most of our attorneys practiced for many years at large institutional law firms before joining Mintz & Gold.

For more information regarding Mintz & Gold's real estate practice, click here.

For a list of representative transactions of Mintz & Gold's real estate group, click here.

For Mintz & Gold's website, click here.

Contact:
Alan Katz
katz@mintzandgold.com
Telephone: (212) 696-4848
Fax: (212) 696-1231



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This newsletter has been prepared for general information purposes only, and is provided with the understanding and subject to the user's agreement that it does not constitute the rendering of legal advice or other professional advice by Mintz & Gold LLP, and does not create any attorney-client or other special relationship. The content of this newsletter may be considered advertising under the ethical rules of certain jurisdictions and prior results do not guarantee a similar outcome. You should not rely upon this newsletter without seeking legal advice from an attorney licensed in the relevant jurisdiction(s). THE CONTENT OF THIS NEWSLETTER IS PROVIDED AS-IS WITH NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. Additionally, the information contained in this newsletter does not constitute tax advice. Any discussion of tax matters contained in this newsletter is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending to another party any transaction or matter.

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